9/09/2010 @ 3:40PM

How My Company Beat Rising Health Care Costs

Debate about health care rages on, but everybody agrees on one thing: Companies of every kind are continuing to wrestle with spiking health care costs, and unless they find a way to rein them in, they’ll buckle under the financial burden down the road.

Health care costs have on average doubled every eight years over the past four decades, and that trend shows no sign of leveling off. Finding a way to keep employees covered and remain profitable is a daunting task for corporate leaders, but during my tenure as the chief executive of Serigraph, a medium-size Midwestern company, we met the challenges head on and solved the health care issue. Over the last seven years our average annual increase in total medical costs was 2.8%, far below the national average of 8%.

How did we do it?

We put employees in charge of their health care.

We “demanaged” employees and empowered them to make decisions about their health care, and when we did that, behavior changes and intelligent self-rationing kicked in. Employees began acting as if it were their money being spent on their health care–because it was.

Our program puts a big chunk of up-front money in employee accounts as an offset to higher deductibles and co-insurance costs. As a result of our implementing this program, over-utilization dropped, and employees started shopping around for value and taking a sharpened interest in their health. In fact, between 2004 and 2010, cholesterol counts at Serigraph dropped from an average of 209 to 193.

We were not alone in this move. Over the last eight years consumer-driven health plans have cut companies’ costs by more than 20%.

We emphasized the importance of making primary-care physicians primary.

The pyramid is currently upside down, with specialists providing the most care, at significantly higher costs. Our plan was to return to the primacy of primary care doctors over specialists, allowing employees to receive more intimate and integrated care from their primary health providers. We use expensive hospitals and specialists only when necessary.

What’s more, we learned early on from the experience of Quad/Graphics, another printing company, that on-site primary care clinics could cut costs by one-third. Seeing this, we established our own on-site clinic and hired a concierge doctor to offer free primary care to any employee who signed up. The result was fewer hospital visits and a much better handle on chronic illnesses among employees.

We promoted “centers of value.”

Centers of value–providers with the best combination of service, quality and price–have become a main focus for Serigraph. Our employees can see the performance and cost variation of providers, viewable via the company intranet site, and that helps them make informed decisions about where they will receive care.

Once we began this, our employees started asking their doctors not only about the medical details of their pending treatments but also about their costs. We had difficulty at first getting exact cost comparisons for similar treatments, but we did our due diligence and developed accurate comparisons. Our Web-based documents also display quality ratings for medical providers to help our employees make value-based purchasing decisions.

Furthermore, we offer rewards to steer employees to the best-in-class providers–regardless of whether those providers are down the street or across the ocean. Dan Kehres, a screen printer at Serigraph, is a prime example of how the system we’ve developed can work. Dan became the company’s first medical tourist when he traveled three hours to Gundersen Lutheran Health System in western Wisconsin for back surgery. The bill for his discectomy and three-day stay with a companion was $12,500. That was one-third less than the average cost in southeastern Wisconsin, where he resides. Serigraph rewarded him for being a shrewd consumer by not charging him a cent for the operation–no deductible, no co-insurance. He won, the company won, and his 500 co-workers won, because they share 25% of the overall cost of Serigraph’s self-insured plan.

Though we still have much more work to do, we have found a way to make health care costs more manageable. It shouldn’t be a foregone conclusion that those costs are rising no matter what. The truth is, with innovative ideas, due diligence and teamwork, the problem can be not only managed, but solved.

John Torinus is a former chief executive officer of Serigraph. He is currently Serigraph’s chairman and is the author of The Company That Solved Health Care, to be published by BenBella Books in October.